UI Tax Reductions for the Coming Year, Better than Expected Trust Fund Recovery and AIV-Led Reforms Help

The Vermont Department of Labor has announced that effective July 1, 2022, employer unemployment insurance taxes will decrease as the UI tax schedule moves from Schedule III to Schedule I. This change is part of an annual statutory calculation performed by the Department based on the Trust Fund’s reserves and historical demands.

In addition, taxable employers will receive additional relief in January 2023 when the UI taxable wage base (TWB) decreases by $2,000. Effective January 1, 2023, the TWB will decrease from its current level of $15,500 to $13,500. Employers will pay UI taxes on the first $13,500 an employee makes in a calendar year.  The last time the taxable wage base was near this level was in 2011 when it was set at $13,000 (not adjusted for inflation).

The reduction in the tax schedule is possible in part because of better than expected recovery in the Trust Fund and also legislative provisions spearheaded by AIV to remove 2020 – which of course included wildly anomalous losses that would have distorted calculations for years – from the ten year window for determining tax levels.

The additional reduction in the taxable wage base is governed by a provision in the 2010 reforms, which AIV also played a key role in, passed in response to the UI Trust Fund’s collapse during the recession at the time.  This provision is intended to try and counter excessive and unnecessary tax collection over time, although it has appeared over the years since that additional corrections to the taxable wage base might be necessary.

Additional adjustments made through this year’s annual determinations include the average UI benefit cost rate for non-profits, the new employer UI tax rate, and the UI quarter qualifying wage.

Unfortunately legislation passed earlier this year to arbitrarily add $100 million in UI costs over the coming years that will ultimately cost employers correspondingly higher taxes than would otherwise be necessary (see related post here).  AIV remains committed to work on repealing/redressing this increase.

If you are interested in more information or opportunities to engage on any of the issues above, please contact us at info@aivt.org.